Old mutual evergreen retirement fund help

[syntax]

So I'm changing companies and this is the fund they use.
It has options with regards to investing,and Im hoping for some advice here.

Basically I can have. Low choice, managed choice or a flexible choice.
The low choice from what I understand seems like low risk no effort investment option, which I quite like because I am not in the know at the moment, not because I am not willing to have some risk.

I am tempted by the managed choice, which gives the options to pick a fund out of a selection. Here I can pick a medium reward medium risk fund, but I have no idea which of the ones they list would be the best option.
Is anyone familiar with this and can offer some advice?

I am currently reading up on investing in general, but I need to make this decision quite quickly and don't think I will be educated enough to do it by myself in the next few days.

I see the funds are divided into smooth bonus, market linked, for life, and targeted return.
I'm going to read up on this , but again if any light can be shed, that would be great.

 

[ClintZA]

How old are you?

An important factor in deciding would be to find out what the actual costs are when they refer to low cost, medium cost and high cost option. In my opinion the Flexible Choice would be the best way to go as it gives you just what it says, flexibility but if it is costing you a large percentage of your contribution every month then possibly it is not worth it. I cannot imagine that the costs would differ dramatically. You are also not limited to Old Mutual funds with that option which is why it probably costs a little more.

They mention a tolerance for high risk for the Flexible Choice but none of those portfolios are particularly high risk. Pension savings are restricted in any case to a maximum of 75% exposure to equity.

 

[syntax]

thanks so much for the swift response.

So,
Im 30, the contributions would be around the 5k mark per month.
The costing per fund is as follows:
Low choice: R14.50, Managed choice: R32.50, flexible choice: R58.50
On top of this, there are fee's dependent on the fund choice. With basic % fee's plus additional fee's depending on the choice.

Im looking at two at the moment:
Old mutual absolute growth (.65% plus 0.25% capital fee)
Symmetry balanced (.60% fee)

Nice to know about the 75% equity exposure

 

[ClintZA]

Just out of interest, and bearing in mind that past performance is never a guarantee of future performance, under managed option they offer you a few OM funds :

Absolute Stable Growth
11.0%pa over 3 years
12.8% over 1 year

Absolute Smooth Growth
12.6%pa over 3 years
13.3% over 1 year

Returns here

I would personally look at the Life Stage funds if I did go for the Managed option. Whether you go aggressive or defensive would depend on your life stage and hence the age question in my previous post.

With the flexible option they offer you some external funds like :

Coronation Managed link
16.81%pa over 3 years
20.06% over 1 year

Investec Managed
14.3%pa over 3 years
15.9% over 1 year


Unfortunately I see it says Allan Gray is now closed for new selections on their fund list. Pity.

The funds listed above are not to be taken as advice on what you should choose but to demonstrate the options available under Flexible. The fact you can choose between different asset managers appeals to me as it adds an element of diversification. As it stands, those external funds have had far better performances than the internal funds offered on the Managed option.

 

[ClintZA]

At 30, with a time horizon of at least 25 years until earliest retirement age of 55, I would be inclined to go far more aggressive. Especially with a recurring investment.

Are you able to show the costs on Coronation Managed, for example? The reason I ask is that I see you mention Symmetry Balanced. Now that fund has the following main equity exposure as part of it's breakdown:
Local equity 41.6%
Foreign equity 17.4%

Its return has been (as at 31 October):
1 year 14.6%
3 year 12.9%

Coronation Balanced has a similar equity exposure:
Local equity 43.1%
Foreign equity 20.9%

Its returns have been as follows (as at 31 October 2012):
1 year 20.06%
3 year 16.81%


So unless it is a lot more expensive, it may be worthwhile allowing yourself the opportunity to diversify into other asset manager's funds.

It is also important to ask, once you choose the Managed option, for example, can you then switch to Flexible at a late date if you so desire? The ability to do so will at least mean that your initial choice will not be as critical as you can always move later.

 

[syntax]

Thanks again so much,
Seems like the only coronation options I have are the coronation managed (.49%, performance fee of 20% benchmark out performance capped at 1.5% per year)
and coronation absolute (.49%, performance fee of 15% of the out performance of CPI +7% over rolling 36 months).

the coronation managed does seem fairly good?

 

[ClintZA]

To me it is always about having choice and the ability to diversify across different asset managers. Geographic and asset class diversification are often punted but I also like spreading over different investment styles and different asset managers often give you this.

Those performance fees you mention seem like they will be well earned. If they can outperform their benchmark by 20% or give you in excess of CPI+7% you'd be a happy investor.

Just comparing the returns of the two funds again, Symmetry Balanced and Coronation Managed, you can see how Coronation regularly outperforms it's benchmark while Symmetry doesn't.

Symmetry Balanced


Coronation Managed


Again, these past performances do not guarantee future performance but they do indicate why it may be better to allow for diversification across asset managers. They are unlikely to all get it wrong all the time unless the markets really battle.

 

[syntax]

thanks so much man!
I am likely to do the coronation managed fund at the moment. It seems to perform well enough, I will likely use other income to invest more aggressively and actively once I get the hang of things

 

[ClintZA]

thanks so much man!
I am likely to do the coronation managed fund at the moment. It seems to perform well enough, I will likely use other income to invest more aggressively and actively once I get the hang of things

Sounds good. Just query whether you can perhaps spread your investment over a few of the offered funds though. You should be able to and then you could split it between Coronation Managed, Investec Managed and perhaps one of their in house funds. That way you are not hedging your bets on one manager making the right calls, although they have done well so far but you never know.